Month: November 2020

Superstars and Team Players
photo shows four hands working together on a puzzle

I played team sports growing up: all my kids at least tried them, too. What do we know about strong teams and strong businesses?

A star player can get a team pretty far—but notching some big wins doesn’t mean the program is sustainable.

It’s a hard lesson for many superstars. Plenty of hot businesses crash and burn under extraordinary people who turn out to be poor leaders.

On a solid team, you don’t need a leader who’s able to do everything: you want a mix across the team. You need to face that not everyone is equally skilled in all areas, and you want to build a space where strengths can shine and powers can complement each other.

So what’s a better alternative to the superstar? We’d suggest it’s the true team player.

Okay, so being a “team player” sometimes isn’t so glamorous. Sometimes people ask you to be a team player when it’s time for you to do something you don’t want to do. It can be a euphemism for a chump.

A team player, however, is someone who can delegate. This type of leader is not so foolish to think they are the only one for the job. This leader isn’t afraid of looking like they’re not up to a challenge—because they know that other team players will recognize the power of working together. Trust begets trust.

Some people mistake a team player for someone who’s okay giving up control. But someone who can work on a team actually gains power: if the work makes it to the person that it’s best for, everyone is free to pick and choose, to optimize how they spend their time.

A lot of endeavors in life require teams. We like to think of our office as one such team, but we are also honored to be part of the team that helps you keep your life running. Clients, by letting us help you, we get to use our skills to focus on one important aspect for you. You’re not giving anything up by inviting us into the process: you’re gaining control, the chance to make more informed decisions that work toward your goals.

We don’t need superstars. Our team has what it takes, and we’ve got the best clients in the world. Call or write when you’d like to chat about this, or anything else.

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Time to Get Off the Ride

We’ve all heard the basic maxim of investing: “Buy low, sell high.” And at 228Main.com, we have talked repeatedly about the perils of buying high or selling low. Just last week we asked, “Where are you on the ride?”

It is true that buying high or selling low can easily hurt you, and to avoid acting rashly, you do need to be able to recognize where you might be in a cycle.

The flip side may be true, too: you also need to be able to make timely moves when the time is ripe. Our philosophy focuses on value investing, and we are fortunate enough that you, our clients and readers, have internalized many of these notions. (So you know that we are not talking about “timing the market.”)

So the “buy low” part is relatively easy: hunting for bargains is fun and exciting! It is easy to look at a company trading at depressed prices and imagine the possibilities, even as you know that they may not necessarily come to pass.

The other part—”sell high”—is more difficult. A holding that has treated you well can be hard to get rid of. It is easy to get greedy and let it keep riding in the hopes of further returns.

But what goes up must come down. The more inflated prices get, the less sustainable they are. When prices enter an unsustainable bubble it is wise to protect your gains by selling while the selling is good.

This does not have to be an all-or-nothing process, though. You might still believe in a company’s long-term story even if prices look unrealistically high right now, in the short term. In this case it might make sense to hedge your bets by only selling part of your holdings. This lets you pocket some gains while keeping some exposure in case of future growth.

This becomes especially important when you have a high-flying investment. If certain holdings are outperforming the rest of your portfolio, they may swell up to become oversized relative to the rest of your holdings. Over time you may find yourself with too many of your eggs in one basket; periodically rebalancing away from a hot streak can help spread your risk around.

Of course, there are no guarantees. None of these strategies are magic. But letting your investments ride with a few big winners can leave them vulnerable to a big tanking at even a hint of bad news. Heck even totally decent news can spell a crash for a hot stock that’s being held up by unrealistic growth expectations.

How do we know when it’s time to get off the ride? Clients, when you have questions or concerns about your holdings, please call or email as always.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.